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SolarCity Revives on Best Buy Deal; "Musk Factor"

On Mar. 12 the Elon Musk-chaired SolarCity (SCTY) notched a substantial gain, correcting the downward momentum the red-hot tech play had experienced during the week.

While the wide-ranging solar industry includes a variety of diverse components, companies either tangentially or directly involved with solar energy tend to move in the market as a monolith. While this might not be entirely fair assumption, the closely-aligned market movement of the major North American solar plays in the first week of March gave credence to that assessment.

Disappointing guidance coupled with a major project delay sent shares of Canadian Solar (CSIQ) down sharply, and along with it, the other major North American solar plays fell over the last five days. First Solar (FSLR) dipped 8.37 percent, SunPower (SPWR) dropped 10.01 percent, and SolarCity fell more than 11 percent over the week.

The bloodletting came the week after SolarCity released their fourth quarter earnings report that showed the tech play beating expectations slightly. SolarCity ran up in the aftermath, adding value to a company that had gained 29.09 percent on the year already.

While most solar plays dropped last week, only SolarCity has rebounded, ostebnsibly because of a deal with Best Buy (BBY) . But a lot of SolarCity’s upward momentum, on Mar. 11 and before, has to do with SolarCity’s special status as a “story stock.”

That’s how Raymond James analyst Pavel Mochalnov referred to SolarCity as far back as May 2013. Investors love the story of the self-made entrepreneur Musk, and Solar City and the Musk-helmed Tesla Motors (TSLA) continue to trade at astronomical levels. To Pavel, story stocks are not tied to reality, and “valuations don’t matter.”

In short, SolarCity might have been drawn down by Canadian Solar, but a dismal report from one solar company can’t overcome the megawatt power Musk seems to have on the market.

SolarCity notched a 4.96 gain on the day to hit $76.99 a share.

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